Progressive 2012 Annual Report Download - page 64

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to further defaults). We reviewed all of our asset-backed securities for other-than-temporary impairment and yield or asset
valuation adjustments under current accounting guidance, and we realized $1.7 million, $3.9 million, and $13.0 million in
write-downs on these securities during the years ended December 31, 2012, 2011, and 2010, respectively. These write-
downs occurred primarily in the residential mortgage sectors of our asset-backed portfolio as detailed below.
Collateralized Mortgage Obligations At December 31, 2012, 6.8% of our asset-backed securities were collateralized
mortgage obligations (CMO), which are a component of our residential mortgage-backed securities. During the year ended
December 31, 2012, we recorded $0.8 million in credit loss write-downs on our CMO portfolio due to estimated principal
losses in the security’s most recent cash flow projections, including $0.1 million of Alt-A securities. During the years ended
December 31, 2011 and 2010, we recorded $3.1 million and $1.7 million in write-downs on our CMO portfolio, respectively,
including $0 and $0.4 million on Alt-A securities. The following table details the credit quality rating and fair value of our
collateralized mortgage obligations, along with the loan classification and a comparison of the fair value at December 31,
2012, to our original investment value (adjusted for returns of principal, amortization, and write-downs):
Collateralized Mortgage Obligations (at December 31, 2012)
($ in millions)
Rating1
Non-agency
prime Alt-A Government/GSE2Total
%of
Total
AAA $ 55.1 $ .3 $ 9.0 $ 64.4 27.9%
AA 0 20.3 2.0 22.3 9.7
A 22.6 2.2 0 24.8 10.7
BBB 18.3 0 0 18.3 7.9
Non-investment grade 80.7 17.9 2.7 101.3 43.8
Total $176.7 $40.7 $13.7 $231.1 100.0%
Increase (decrease) in value 2.4% 7.5% 9.6% 3.7%
1The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings, our non-investment-grade securities (i.e.,
Group I) represent $10.3 million, or 4.5%, of the total.
2The securities in this category are insured by a Government Sponsored Entity (GSE) and/or collateralized by mortgage loans insured by the
Federal Housing Administration (FHA) or the U.S. Department of Veteran Affairs (VA).
Home-Equity Securities At December 31, 2012, 5.8% of our asset-backed securities were home-equity securities, which are
a component of our residential mortgage-backed securities. We recorded $0.8 million, $0.2 million, and $9.4 million in write-
downs for the years ended December 31, 2012, 2011, and 2010, respectively. The following table shows the credit quality
rating of our home-equity securities, along with a comparison of the fair value at December 31, 2012, to our original
investment value (adjusted for returns of principal, amortization, and write-downs):
Home-Equity Securities (at December 31, 2012)
($ in millions)
Rating1Total
%of
Total
AAA $ 11.5 5.8%
AA 11.4 5.8
A 34.4 17.4
BBB 21.4 10.9
Non-investment grade 118.4 60.1
Total $197.1 100.0%
Increase (decrease) in value 3.4%
1The credit quality ratings in the table above are assigned by NRSROs; when we assign the NAIC ratings, our non-investment-grade securities (i.e.,
Group I) represent $0.2 million.
App.-A-64